Government processes 1,170 indigenization applications, rules out company closures for non-compliance

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THE government has ruled out shutting down companies failing to comply with its indigenisation law, opting for engagement but admits failing to enforce the legislation with some firms ignoring it completely, a junior minister told Parliament on Thursday.
The Indigenization Act — enacted in 2008 — requires foreign owned companies valued at over $500,000 to cede 51 percent to black locals. The local ownership law has been cited as a major impediment to foreign investment in an economy battling to recover from a decade-long recession.
Last week, advisory firm Brainworks Capital said only one indigenisation deal had been consummated by government, while transactions worth over $1 billion with major platinum mining firms Anglo American Platinum, Impala and Aquarius had been abandoned.
But Youth, Indigenization and Economic Empowerment deputy minister, Mathias Tongofa told the parliamentary committee on indigenisation that the miners were among the many in mining and manufacturing who were yet to submit revised plans despite the deadline expiring in March.
In January, the government gave businesses 60 days to amend their indigenisation plans as part of changes to the law to encourage investment.
“Some (companies) are adamant, some are violating the law and some haven’t even filled in the forms yet,” said Tongofa, adding that government had processed 1,170 applications in the last five years.
“There are provisions within the law to punish these companies. However, the ministry doesn’t do it in isolation. According to the law, we should work together with the licencing authorities to either deny renewal of licences or revoke the licences.”
Mobile operator Telecel Zimbabwe had its operating licence revoked in April for failing to comply with the law but challenged the decision in court. The High Court also allowed it to continue operating until a ruling on the challenge is made.
Tongofa said government was trying to strike a balance between applying the law and preventing job losses through company closures.
“We try to balance the act between the closure of companies and viability of the economy as well. We are sandwiched so to speak,” he said.
“We are not saying we are not going to force (companies) to comply but we are saying we don’t want to use that hard way of doing it because they will close. We are looking at the repercussions.”Advertisement

Tongofa however, said some of the “most difficult”companies were complying but also attributed the delays in implementation of the law to disharmony with other legislations crafted during the colonial era.
“There is therefore need for government to revisit other pieces of legislation such as the Mines and Minerals Act and Zimbabwe Investment Act to ensure that the provisions reinforce implementation of the new constitutional requirements and the Indigenization and Economic Empowerment legislation,” he said.
Tongofa said since 2011, at least 61 Community Share Ownership Trusts had been registered, with only 20 being functional while  $38 million seed capital had been deposited  by companies.
At least $14,7 million had been spent in the past two years, he said. Since 2010, at least 187 Employee Ownership Trusts had been established.